Cash vs Dividends

Like many here I rely on dividends for income.

I'm quite conservative in my forecasting and budget on about a 4% return, although reality has been pleasantly higher recently.

I also have a hefty chunk of money in cash since fortuitously selling some shares before 2020 and all my bonds before 2022.

Until recently the return on this has been barely worth recording, but thanks to the RBA it is now sitting at the magical 4% level.

Whilst I'm optimistic about equity long term, I can't help wondering if it is worth the hassle given we don't really need to grow our pot, just live off it.

Anyone else feeling that way?

 

Nope.

 

Rates are higher because of inflation. You still need growth.

 

Saving/investing and "growing" the pot is generally a mindset, it doesn't often switch off when you have enough (raises the question of when is enough enough......).

Yep, even getting 4% your money isn't keeping up with inflation (so technically one is losing capital).

 

Nope. Not sure what hassle your talking about, Cash is trash, so is gold. One mans trash is another mans treasure.

 

Why not start to DCA your cash back into markets to hedge your bets?

 

I should really have titled the thread Cash vs equities vs bonds.

That would be the idea (post above).

Previously I used bonds to hold loot for equity downturns.

But as we have seen that would have been very unwise recently.

But with cash outperforming VAS, VDHG and VAF over the last year, for example, and now offering a worthwhile yield, it seems like real alternative.

Whilst I am optimistic about the long-term performance of equities, I'm less convinced now is a good time to add to my core holdings.

Even the chap who coined 'cash is trash' now calls it more attractive than stocks and bonds

Cash Is No Longer Trash, Says Ray Dalio, Who Calls It More Attractive Than Stocks and Bonds

 

It's impossible for cash to outperform capitalism in the long term.

 

At 4% return you’re going backwards due to inflation.

 

Yes
Macquarie 4.41%
I do like cash atm

If you are holding a sizeable asset base, you can ride the highs and lows regardless. No need to do anything

 

Yep, years ago saw the results of two relos one of whom went down the cash only path. Despite retiring with a lot more than the other, ended up with nothing but the age pension. The other had a more modest amount at retirement but invested his super in shares. Although in receipt of an age pension, the additional income from shares, although not great, enabled him to enjoy activities the other couldn't. No prizes for guessing who was the happier person.

 

I guess it depends on how close you are to leaving this earth and what you want to leave behind. Like if I was 80 I would be okay in cash. At 60 not. And of course how much cash you have.

 

No , you probably don't realise the possibilities .
If you have reached that level and the cash can provide a significant income as you will do better then 4% fixed paid monthly..

 

Are you a conservative investor, perhaps risk averse?

Nothing wrong with some cash as one part of your asset allocation if it gives you comfort - as they say, when you’ve won the game, stop playing.

 

I'm pretty sure the question wasn't "Should I sell all my equities and sit in cash..." in which case the answer, I'm sure, from all perspectives is "No!!!!". It was "I have a bunch of cash (and no doubt a really tidy pile of equities currently financing the life) does anyone feel like it's not worth putting more cash into equities right now?"

So I get the sentiment, but I'm not there yet. Another couple of percent on the official interest rate which flows through to the available cash rate (probably won't happen) and my-personal-inflation-measure (MPIM) a couple of percent under that available cash rate and all other things being equal (which they never are) then I completely get the sentiment.

For now, it's back into equities with any spare cash I have.

I have a bunch of things I haven't bought yet - a car, a new kitchen, a holiday, a music gear fund, a health fund, a rainy day fund - and because I live the life accrual (where I accrue for everything) I've long been saving up for these things and between the lot of them they are into 6 figures. It's in cash. UBank - 4.6%.

I could chuck probably half into equities as the cash replenishes quickly enough when I want it to (thank you defined benefit pension!) - because god knows it's not exactly the best time to buy a new car - but I don't because, actually, 4.6% risk free is actually pretty good at the moment.

And I got an email on Monday from AMP. 4.8% if I just deposit $1000 a month. Not too shabby. Ubank and AMP are the standout cash providers at the moment. Too many hoops for all the others.

 

Not me. I have shares, property and cash. As day to day expenditure is well under income I'm accumulating cash which I'm using for a series of major PPOR renovations. Except for corporate takeovers I'm not selling anything. I may buy an undervalued asset. There's value and income volatility in shares and to a letter extent property. I accept this in the knowledge that the long term total return will be good.

Yield does not matter much in the long term. One company pays 2.66 per cent yield, quite low. However, as the shares have gone up 12 times what I paid for them (down from 15X) the yield on what I paid is 33 per cent. You cannot get this sort of return with cash.

Find a good asset and hold it forever. Ignore the daily noise, especially daily financial reports.

 

It’s actually a funny thing to see cash in bank account’s actually earning money.

Almost forgot it was possible!

 

I have an advertisement from decades ago showing a deposit rate of 12 per cent or so. Mortgages were around 17 per cent. It seems to be a little unreal compared to today.

 

Most people think of cash and earning rates are modest. They may not have experienced it or remember it but cash was a store for capital protection. It is the investment that doesnt lose 30% when the markets crash. I regret to say it but I hear way too many people think index funds are immune for market corrections and are a continually compounding growth investment. ALL markets correct.

I had smsf clinets aged in their 70s. They had a simple investment strategy. 25% each invested into TDs with the 4 major banks. They didnt earn much but never lost a cent. Meanwhile they knew lots of friends who lost a lot when markets crashed or companies collapsed.